LONDON, April 20 (Reuters) - Europe's largest bank HSBC said on Friday it would mostly stop funding new coal power plants, oil sands and arctic drilling, becoming the latest in a long line of investors to shun the fossil fuels.

Other large banks such as ING and BNP Paribas have made similar pledges in recent months as investors have mounted pressure to make sure bank's actions align with the Paris Agreement, a global pact to limit greenhouse gas emissions and curb rising temperatures.

"We recognise the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement... and our responsibility to support the communities in which we operate," Daniel Klier, group head of strategy and global head of sustainable finance, said in a statement.

HSBC said it would make an exception for coal-fired power plants in Bangladesh, Indonesia and Vietnam.

"There's a very significant number of people in those three countries who have no access to any electricity," HSBC CEO John Flint told HSBC shareholders at the bank’s annual general meeting in London on Friday.

"The reasonable position for us is to allow a short window for us to continue to get involved in financing coal there... if we think there is not a reasonable alternative," he said.

Aside from the coal exemptions environmental campaigners Greenpeace welcomed the move and said HSBC's new energy strategy would prevent it from providing project finance for TransCanada Corp's proposed $8 billion Keystone XL oil pipeline to Nebraska.

"This latest vote of no-confidence from a major financial institution shows that tar sands are becoming an increasingly toxic business proposition," John Sauven, executive director of Greenpeace UK said in a statement. (Reporting By Susanna Twidale; Additional reporting by Lawrence White; Editing by Susan Fenton)